Central government's use of consultants and interims - Public Accounts Committee Contents

1  Departmental spending

1. The use of consultants and interims is an area of significant discretionary spending. NAO analysis shows that in 2009-10 departments spent £789 million on consultants and an estimated £215 million on interims. In May 2010 the Government announced immediate plans to save £1.1 billion on discretionary spending, including consultancy. In June 2010 the Cabinet Office introduced new measures across government to control the use of consultants and the recruitment of interim staff, including collecting monthly data on the use of consultants. Analysis indicates that the new measures are reducing the number and value of contracts being placed.[2] Cabinet Office data presented at the hearing suggested departments have reduced spending by 46% in the first half of 2010-11 compared to the previous year.[3]

2. There is a large variation between departments as to the amount of money spent on consultants compared to their staff costs.[4] For example, for every £100 spent on its staff, the Department for Transport spends a further £70 on consultants whilst HM Revenue & Customs spends just £2.[5] There may be legitimate reasons for departments to have differing levels of consultancy use but the Cabinet Office was unable to explain broadly what each department should expect to spend on consultants.[6]

3. The Cabinet Office was also unable to explain the reasons why there is such variation in departments' reductions in spending since stringent controls were introduced post-election. The Department of Health, for example, has reduced its spending by 95% in the first half of 2010-11, whereas the Department for Transport has only reduced its spending by 1%.[7] The Cabinet Office insists that there is a clear approvals process for spending. However, it did acknowledge that much of the reduction may be due to stopping past programmes.[8]

4. There is a danger of a 'stop-go' approach to spending on consultancy and the Cabinet Office told us that there is likely to be a resurgence in consultancy spending during this Parliament.[9] Reducing consultancy spend in an uninformed way to make short term gains can result in significant long-term cost increases and poor value for money for the taxpayer. For example, HM Revenue & Customs, had ceased hiring consultants for six months which had stopped its proactive campaigns on tax collection. It seems at odds with achieving good value for money to stop spending on consultants that are needed to run a revenue increasing scheme.[10]

5. Arms length bodies spent an estimated £700 million on consultancy in 2009-10, almost as much as core departments but the data on spending in these organisations appears to be a complete black hole.[11] The Cabinet Office told us that due to the independent status of some arms length bodies it is not possible to get a grip on their spending. Transparency on this point should not be optional. It is perfectly reasonable to expect visibility of arms length bodies' spending given the money is handed to them by central government.[12]

6. Departments have a poor understanding of the work that consultants routinely perform for them. The National Audit Office report found that few departments were able to provide details on their spending on consultants broken down by categories as defined in the Public Sector Procurement Expenditure Survey, and over a third of all spending was uncategorised.[13] The Cabinet Office told us it is focussed on improving information across central government departments and arms length bodies so it has a stronger baseline against which to measure progress. It committed to having a category purchasing system up and running by the start of the next financial year.[14]

7. Spending on interims is particularly unclear across government. The Cabinet Office has an understanding of the total number of interims across government and estimated that the spending on them represented around 2% of the total pay bill.[15] Available data was not detailed enough to gather an understanding of how long individual interims are employed for, what positions they hold, and how much they are paid.[16]

2   C&AG's Report, para 5 Back

3   Qq 8 and 17, Ev 19 Back

4   Q 3: C&AG's Report, para 1,9 Back

5   C&AG's Report, figure 5 Back

6   Qq 3 and 122 Back

7   Q 8, Ev 19 Back

8   Q 8-11 Back

9   Qq 48-49, 51 Back

10   Qq 13-14 Back

11   Qq 17 and 19: C&AG's Report, para 15 Back

12   Q 41 Back

13   Q 121: C&AG's Report, para 2.8 and 1.10 Back

14   Q 121 Back

15   Qq 21 and 22 Back

16   Qq 22 and 23 Back

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Prepared 21 December 2010